Credit Card Company Abuse

Credit card companies use tricks to abuse the average consumer - watch out for universal default on all cards, bait and switch offers and over limit fees. Congress is now looking into these abuses.

Credit card companies have been abusing their customers for years and now Congress is finally looking into the matter. At a recent hearing in Washington, Senator Carl Levin, Democrat of Michigan said “I don’t believe that the average consumer understands it, believes it, thinks its fair, and I don’t either.” As an average consumer I can say I don’t understand all the tricks played by the credit card companies but I know it’s not fair. As a bankruptcy lawyer, I see people in my office every week overwhelmed by credit card debts who have been tricked by the credit card companies.

Executives from credit card companies including Chase, Capital One and Barclays were called to testify at the Washington hearings. The testimony was not pretty. A Chase credit card customer testified that he had made credit card charges in 2001 in an amount of $3,000 and never used the card again. The customer made payments of $6,300 on that original loan of $3,000 and still owed $4,400 at the time of the hearing in March of 2007. Richard J. Srednicki, the chief executive of Chase was asked to explain. There was not good answer. “We blew it” Srednicki said and “our policies and procedures failed and we deeply regret it.” Chase agreed to forgive the debt owed by this customer but what about the thousands of other consumers Chase abused? The testimony of the other credit card companies was equally unconvincing.

It seems the credit card companies use a number of tricks to abuse the customer including universal default, bait and switch offers and over limit fees.

UNIVERSAL DEFAULT - is a trick where the credit card company will increase your interest rates even if you are not late on any payments if you have been late on a payment to ANOTHER credit card. So if the interest rate goes up on one of your credit cards watch out – the interest rate may go up on all of your credit cards.

BAIT AND SWITCH – is a trick where a credit card company advertises a low interest rate but in the fine print state that if you don’t qualify for the low interest rate they can charge you the a high interest rate. Many customers don’t read the fine print and end up getting a high rate card.

OVERLIMIT FEES - the over limit fees have increased over the past several years and are now as high as $35 for being only $1 over your limit. Also if you go over your limit once and stay there for several months you get an over the limit fee EVERY MONTH that you are over. The guy who had a Chase card discussed above went over his limit 3 times but was charged over limit fees 47 times. A good website which discusses credit card hazards can be found at www.trustaboutcredit.org.

At the hearing, Christopher Dodd Democrat from Connecticut said to the bank executives “If you are currently engaged in any business practice that you would be ashamed to discuss before this committee, I would strongly encourage you to cease and desist that practice.” These companies should be ashamed of the tricks they pull on the average consumer, but they will not cease and desist these practices as long as they can get away with it.

These are the same companies who cried out for bankruptcy reform a few years ago claiming the customers were “abusing” the credit card companies. I think it is time to turn the tables. We should ask the Congress to pass a law prohibiting the credit card companies from abusing the consumer. You can find the e-mail address for your representative in Congress at http://www.house.gov/writerep. Write and tell your representative that you want the credit card companies to stop abusing the average customer.

-Patrick McMahon, San Francisco Bankruptcy Lawyer helping people in San Francisco, Oakland, Alameda, Contra Costa and San Mateo Counties find relief in bankruptcy in California for over 10 years.